Deck 43: A: Law for Small Business

Question 1

Significant factors to consider when choosing a business form include the titles of its officers.

Answer 1

False

Question 2

To protect trade secrets,a company may include a covenant not to compete in an employment contract.

Answer 2

True

Question 3

Generally,your trademark must not be the same as another's mark or so similar that confusion results.

Answer 3

False

Question 4

An employer cannot check to see if a job applicant has any history of criminal conduct.

Question 5

Unlike corporate bylaws,the articles of incorporation are easily modified.

Question 6

A limited liability company has less legal flexibility than a corporation.

Question 7

A "take-along" right allows a corporate investor to participate in any sale of the corporate shares to a third party.

Question 8

The Small Corporate Offering Registration can be used for large offerings of shares for purchase by members of the public.

Question 9

Legal limited liability generally is necessary for those who wish to raise outside capital.

Question 10

Federal and state laws prohibiting discrimination in employment relationships protect employees and independent contractors.

Question 11

Standard-form contracts are available on the Internet,and they should be used "as is" to save time and money.

Question 12

Trade secrets should not be disclosed to a venture capitalist without a confidentiality agreement.

Question 13

Filing a corporate name with the appropriate state official will protect the name as a trade name within the state and within contiguous states.

Question 14

The owners of a limited liability company are called shareholders.

Question 15

The duties of a limited liability company's managers may be limited by its operating agreement.

Question 16

Like a corporation,a limited liability company is required to hold an annual meeting.

Question 17

Limited liability organizations do not protect their owners' personal assets from liability for the organizations' obligations.

Question 18

An attorney is not helpful when a business negotiates agreements to license intellectual property.

Question 19

One way to raise capital to expand a business is to exchange equity in the company for funds.

Question 20

Many states have certification programs that identify specialists in various legal areas.

Question 21

Nichel designs a new office-management software program and incorpo?rates Nichel's Niche,Inc. ,to make and market it.To sell a limited number of shares of stock to the public,the firm must register the shares with

A)an attorney with securities law expertise.
B)a venture capitalist.
C)the Securities and Exchange Commission.
D)the U.S.Patent and Trademark Office.

Question 22

Page opens Quik Xpress,a local delivery service.Unless Page expressly adopts a certain form of business organization,the law considers Quik to be

A)a corporation.
B)a limited liability company.
C)a partnership.
D)a sole proprietorship.

Question 23

Rudy operates Silver Buckles,a small-business equine enterprise.To raise capital,Rudy contacts Thad,a venture capitalist.Besides capital,Thad will most likely

A)assist in the drafting of a business plan.
B)decline a proportion of future profits.
C)offer assistance with respect to business strategy.
D)refrain from demanding operational control.

Question 24

Hopper wants to start Ice Rinx as a new business enterprise.Josh is an attorney.Hopper most likely needs to consult Josh because

A)ignorance of the law is a defense against liability.
B)it adds credibility with potential investors and lenders.
C)keeping up with laws that govern business conduct is difficult.
D)managing accounts receivable and accounts payable is critical.

Question 25

Payroll Services Company is a small business with ten employees.The regulations of the Occupational Safety and Health Administration exempts

A)all small businesses.
B)businesses for whom penalties would be difficult to absorb.
C)businesses with fewer than fifteen employees.
D)no small businesses.

Question 26

Elise and Flair are partners in Gourmet Cupcakes,a new general partnership and business enterprise.As general partners,Elise and Flair are subject to liability that is

A)limited to the amount of their investment in Gourmet Cupcakes.
B)limited to the deductible on Gourmet Cupcakes's insurance policy.
C)limited to the extent that Elise and Flair believe to be reasonable.
D)not limited with respect to Gourmet Cupcakes's obligations.

Question 27

Bro wants to incorporate Chop Shop,a motor vehicle repair business.Incorpora?ting requires filing,with the appropriate state office,

A)a copy of the corporate liability insurance policy.
B)a corporate name.
C)corporate bylaws.
D)nothing.

Question 28

Loudon Machinery,Inc. ,wants to fire its employee Newt,who is an at-will employee.This means that Newt can be fired

A)for any reason or no reason.
B)for cause only.
C)only if Newt agrees to quit.
D)under no circumstances.

Question 29

When Flash Flush Company is incorporated in Georgia,the state agency with which the business name is filed approves it as a trade name.This filing will protect the name

A)only within Georgia.
B)throughout the United States.
C)in every United Nations member country.
D)wherever the name might be used.

Question 30

B2B,Inc. ,an inventory management firm,is a corporation.Cody is one of B2B's owners-a shareholder.If Cody's dies,B2B

A)automatically terminates.
B)continues in business.
C)dissolves unless the other owners agree to continue.
D)distributes Cody's shares to the other shareholders.

Question 31

To protect its trade secrets,Gnu Processes,Inc. ,may require employees that have access to the secrets to agree in their employment contracts not to

A)compete with Gnu.
B)memorize the trade secrets.
C)quit working for Gnu.
D)think about the trade secrets after work.

Question 32

Mountain Valley Winery Corporation's attempt to raise $1 million from a few select inves?tors is

A)a shareholder agreement.
B)key-person insurance.
C)a private offering.
D)a public offering.

Question 33

Brent's Barber Shop hires only independent contractors such as Christi as workers.This hiring practice allows the employer to avoid all laws governing

A)employment relationships.
B)workplace safety.
C)business liability.
D)tax obligations.

Question 34

Fact Pattern 43-B1
Jordan and Kacy own and operate Safety Tables,a small-business enterprise that sells adjustable tables that allow workers to safely work with large,heavy,or oddly shaped objects.The enterprise does not pay taxes on its profits,but distributes them to Jordan and Kacy who pay taxes on these amounts as their individual income.Jordan and Kacy's personal liability for Safety Tables's debts and obligations is limited.
Refer to Fact Pattern 43-B1.Safety Tables is

A)a corporation.
B)a general partnership.
C)a limited liability company.
D)a sole proprietorship.

Question 35

Mick starts a business to market nationally long-distance phone time as Mick's Minutes.Registering his trademark with the U.S.Patent and Trademark Office provides nationwide protection for the mark

A)if the mark is currently in use.
B)only if the mark has not yet been used.
C)only if the mark will not be used for at least six months.
D)only if the mark is currently in national use.

Question 36

Fact Pattern 43-B1
Jordan and Kacy own and operate Safety Tables,a small-business enterprise that sells adjustable tables that allow workers to safely work with large,heavy,or oddly shaped objects.The enterprise does not pay taxes on its profits,but distributes them to Jordan and Kacy who pay taxes on these amounts as their individual income.Jordan and Kacy's personal liability for Safety Tables's debts and obligations is limited.
Refer to Fact Pattern 43-B1.Safety Tables is ex?empt from legal requirements that relate to

A)health and environmental permits.
B)zoning and building codes.
C)import/export regulations.
D)none of the choices.

Question 37

Huck decides to open River Raft Adventures as a tourist service and operate the business as a corporation.At the directors' initial meeting,the directors are most likely to

A)draft articles of incorporation.
B)adopt bylaws.
C)choose a corporate name.
D)print and distribute stock certificates.

Question 38

Joy and Kersey want to open a magic and novelty shop as Jo-Kers,with a plan to open other shops in the future.To attain limited li?ability for the lowest cost and the fewest start-up formalities,their best op?tion is to form

A)a corporation.
B)a limited liability company.
C)a limited partnership.
D)a sole proprietorship.

Question 39

Lee wants to begin importing athletic shoes under the corporate name Mercury,Inc.Mercury should include most of its corporate rules in

A)the articles of incorporation.
B)the bylaws.
C)the corporate charter.
D)the minutes of the first meeting of the board of directors.

Question 40

Price and Quint are starting a small machine shop-Riverside Boat Repair-and are considering whether to organize the business as a lim?ited liability partnership.This form

A)does not limit its owners' personal liability for business debts.
B)limits its owners' personal liability for business obligations.
C)obviates the need to obtain insurance for business liability risks.
D)requires three partners to accept liability for potential risks.

Question 41

Diana and Earl incorporate their computer technical support business as Fast Aid,Inc.Diana contracts with Gina to respond to Fast Aid's cus?tomer service calls on a commission basis.What are the advantages and disadvantages to Fast Aid of classifying Gina as an independent contrac?tor rather than as an employee? Earl obtains a loan from First National Bank and signs a promissory note for repayment of the amount without indicating that he is doing so on behalf of Fast Aid.Fast Aid does not make enough profit its first year to make payments on the loan.Charging default,the bank files a suit against Earl for the unpaid amount.Earl re?sponds that he was acting on behalf of Fast Aid.Will the bank succeed against Earl? Why or why not?

Question 42

Winnie opened her first Xtreme Sportz outlet six years ago.To open out?lets in more locations,Winnie needs capi?tal and wants to attract inves?tors.How can she do this?